While you were sleeping: Boehner cites lack of progress

While you were sleeping: Boehner cites lack of progress,
US economy grows

Nov. 30 (BusinessDesk) –
Underlining just how much in thrall of Washington global
financial markets are right now, US stocks and the euro sold
off after U.S. House Speaker John Boehner said there had
been “no substantive progress” in talks to avoid the
fiscal cliff.

Republican Boehner made the comments after
speaking with President Barack Obama and Treasury Secretary
Timothy Geithner, saying there was a real danger no
agreement would be reached to avoid US$607 billion of
automatic tax increases and spending cuts that kick in on
Jan. 1, just 32 days away.

Democrats “have yet to get
serious about spending cuts,” he said. There was no
mention of the optimism he cited 24 hours ago that gave a
boost to Wall Street and was echoed around the globe.

The
stakes couldn’t be higher. Falling off the fiscal cliff
could drive the US jobless rate back up to 9.1 percent by
the end of 2013 and send the world’s biggest economy back
into recession, the Congressional Budget Office says,
potentially stalling global growth.

The dollar pared its
decline against the euro, which traded recently at $1.2967,
having early touched $1.30.

US stocks did recover some
ground after the selloff. The Dow Jones Industrial Average
was up 0.2 percent and the Standard & Poor’s 500 Index up
0.4 percent.

"One minute the portents for a deal on the
fiscal cliff are negative, the next minute they are
positive,” Mike Mason, a senior trader at Sucden Financial
Private Clients in London, told Reuters. “This is likely
to be the pattern all the way up to the deadline on January
1. Equities are sure to remain volatile and trading subdued
until there is any concrete outcome to these
negotiations."

Economic data in the US was mixed, though
the revised reading for gross domestic product in the third
quarter was 2.7 percent, up from the 2 percent pace
previously published. That just missed the estimate in a
Bloomberg survey of 2.8 percent and marks an acceleration
from the second quarter’s 1.3 percent growth.

Consumers,
though, were subdued. Household spending rose a revised 1.4
percent, down from the first reading of 2 percent, according
to the Commerce Department. Economists were hoping the
revision would only be down to 1.9 percent.

Yet the US
trade deficit shrank for revised to US$403 billion from an
initial estimate of $413.7 billion and inventories turned
positive.

And an index of pending home resales beat
estimates by rising 5.2 percent, according to the National
Association of Realtors, while the number of Americans
applying for jobless benefits fell 23,000 to 393,000 last
week, according to the Labor Department.

Stocks in the UK
rallied, as did equity markets across Europe, which closed
before Boehner made gloomier noises about the US fiscal
cliff. The FTSE 100 advanced 1.2 percent, with Rio Tinto up
5.1 percent. Germany’s DAX 30 climbed 0.8 percent and
France’s CAC 40 was up 1.5 percent.

In the UK, Lord
Justice Brian Leveson’s long-awaited report into media
ethics that followed the phone hacking scandal at Rupert
Murdoch’s News Corp called for a new independent media
regulator to stamp out unethical behavior.

UK Prime
Minister David Cameron, who himself was tarnished by
associations with Murdoch’s lieutenants in Britain, have a
tepid welcome to the report while saying he wouldn’t
support new law to enshrine such a
body.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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